Tax (inclusive) on the consumption of goods or services in SA (14%)

1. The Basics
1.1 Introduction:
Each time consumer purchases goods or services (G or S) from vendor in SA, pays price that includes VAT.

 Indirect tax (consumer pays, entity collects + gives to SARS) & direct cost to final consumer (can’t claim
back from SARS)
 Charged on usage
 Registered vendors may claim VAT as Input Tax in certain circumstances
 Based on subtractive or credit input method :. OUTPUT (tax collected) less INPUT (tax incurred)

1.2 VAT Calculation:

Step 1: Calculate OUTPUT TAX

Step 2: Calculate INPUT TAX

Step 3: Determine VAT ADJUSTMENTS (if any) & take into account

Step 4: Input > Output = Refund Output > Input = Payable

OUTPUT TAX less INPUT TAX add/less ADJUSTMENTS

= VAT PAYABLE / REFUNDABLE

Step 5: Complete VAT 201 form

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 Invoice Basis
1.3 Accounting Basis
Payments Basis

INVOICE BASIS (most vendors work on this basis): VAT accounted for on earlier of

 invoice issued or
 any payment received

o Can create cash flow problems

o Once operating under invoice basis, remain on this basis
o If vendor changes from invoice to payments basis, must calculate amount payable or refundable

PAYMENTS BASIS: VAT accounted for when

 payment made (purchases) and payment received (sales)

o Helps with cash flow

o Can use Payments Basis if applied to Commissioner in writing and vendor is:

 Public authority / municipality / municipal entity

that supplies electricity, gas, water etc.  Natural person
 Association not for gain (welfare) AND
 Water board  Total value of taxable supplies
 Electricity distributor <= R2.5 million (excl. VAT)
 Foreign Electronic Service Provider in 12 month period
 Person voluntarily registered & value of taxable
supplies < R50 000 (until reach R50k then INVOICE)

Any supply of R100 000 (incl VAT) or more (excluding fixed property) accounted for on Invoice Basis!

1.4 Tax Periods

 Every vendor registered for a specific tax period
 Majority fall into category A & B (every 2 months)

Focus on Category A, B & C

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 Category Tax Period Requirements Additional Info
 Taxable Supplies  Vendors
(T.S) in 12 mth consistently
2 months: ends last day
A (ODD) period <= R30m receiving income
of Jan, Mar, May…
 Farmers with T.S. >  Spreads admin for
R1.5m SARS
2 months: ends last day
B (EVEN)  Same as ‘A’  Same as ‘A’
of Feb, Apr, Jun…
 T.S in 12 mth period
> R30m (or likely to  For BIG vendors, or
1 month: last day of be)  If SARS flags you
C
each month  Applied in writing (because you don’t
 Due to default ito pay etc.)
VAT act
 Only farming
activities & T.S in 12
6 months: end on last mth period < R1.5m  Seasonal business :.
D
day of Feb & Aug  Registered micro longer periods
business (apply in
writing)
 Co.s / trust who only  Connected persons
business = letting of must all be
12 months: end on last fixed prop/movable registered
goods to OR
E day of their yr of  1 only holds the PPE
admin/management
assessment (YOA) of co.s that are & rents it to the
connected persons connected person
with vendor e.g. sister company

1.5 Tax returns & payments

 VAT 201 form + PMT to SARS on/before the following day:
 Submitted within 25 days/last business day after end of tax period

Payment Method Returns (day of mth) Payment (day of mth)

th th
SARS drop box (not >R100 000) 25 no later than 15:00 25 no later than 15:00
Cheque (not >R100 000 – even if 25th 25th
multiple cheques used)
Pmt at any of 4 major banks 25th 25th
Debit order (return submitted 25th 25th
via e-filing)
E-filing of return & pmt via Last business day Last business day
SARS’s e-filing system
EFT & return submitted via e- 25th 25th
filing

If day falls on a public holiday/weekend, submit on the business day prior to this.

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 1.6 Penalties & Interest
 Person liable for pmt of VAT fails to make pmt within prescribed period:
o Penalty of 10% of tax due
o Interest at prescribed rate (calculated from 1st day of mth following mth in which pmt due)
o Commissioner can prescribe time that pmt must be made – if late, deemed to be made on
next business day

1.7 Refunds
 INPUT > OUTPUT or amount erroneously paid = vendor entitled to refund
 Must be claimed within 5 yrs
 If amount < R100 – NOT REFUNDABLE
 SARS must refund within 21 business days (interest free) after receipt of vendor’s return
 Interest (at lower rate) paid by SARS if refund is later than 21 days (this = Gross Income)

1.8 Valid Tax Invoice (may have to explain if valid tax invoice)
 Input VAT can only be claimed if vendor has valid tax invoice (also if input not specifically denied)

Always starts
with a ‘4’
R7 VAT not a
big risk

For each item

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2. OUTPUT Tax:
2.1 Basics
Tax charged by vendor for supply of G or S by him :. levied on ALL business txs
2 TYPES OF SUPPLIES

TAXABLE SUPPLY EXEMPT SUPPLY

 Standard-rated @ 14% (All other supplies  No VAT on tx
not zero-rated or exempt) incl. deemed
supplies
 Zero-rated @ 0% (pay R0 VAT to SARS but
can claim inputs)

 Calculate VAT @ standard rate, use TAX FRACTION: 14/114

2.2 Levying of OUTPUT tax

OUTPUT tax is levied on
1. The supply of

 goods, or
 services
 in SA
 by a vendor Don’t
 in the course or furtherance of an enterprise show as
OUTPUT
2. Importation into SA of goods by any person (need not be a vendor) tax! NOT
on VAT
3. Supply of imported services to a non-vendor or to a vendor iro non-taxable supplies
201 form!

1. THE SUPPLY OF GOODS OR SERVICES

a. SUPPLY
o includes a sale, rental agreement, instalment credit agreement
o and all other forms of supply
o whether voluntary, compulsory or by operation of law (e.g. expropriation),
o irrespective of where supply is effected

b. GOODS
o Corporeal movable things (can be physically touched)
o Fixed property (land & improvements to land)
o Any real right in such thing / property (servitude / usufruct)
o Electricity (goods & not services)

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 o EXCLUDES:
 Money (supply of cash e.g. granting of loan, bill of exchange, postal orders, promissory
notes) BUT not coins from precious metal (gold, platinum, iridium NOT silver)
 Revenue stamps – gov. stamp to prove certain taxes have been paid (except where
acquired by stamp collector) excl. normal postage stamps (these are goods)
 Right under mortgage bond / pledge

c. SERVICES
o anything done or to be done
o including granting, cession or surrender of a right
o making available of a facility or advantage

o If something is not a supply of goods (and not specifically exempt) it will be a supply of services

o Includes supply of trademarks, goodwill, patents & know-how

d. BY A VENDOR
Used as an agent to collect tax, submit VAT 201 with pmt to SARS @ end of each tax period

 Person registered or required to register under VAT Act

PERSON includes:
 public authority
 municipality
 company/CC
 body of persons (partnership – separate person for VAT purposes)
 deceased & insolvent estate
 trust fund
Registration
VOLUNTARY COMPULSORY

Voluntary levying of VAT allows vendor to claim Required by law to register:

input tax (good idea if person is supplying mainly to
vendors or if he supplies zero-rated goods e.g.  value of T.S. > R1m
exporter) o during prior 12 mth period (when
register?@ end of mth)
If no register, ↑es prices :. lose customers o anticipated contractually for next
12 mth period (when register? @
May register if conducting an enterprise and:
begin of mth)
 value of T.S > R50 000 and <= R1m during  Foreign Electronic Services > R50 000 (@
 prior 12 mth period OR end of mth must register) (levels playing
 next 12 mth period (good indication + fairly field for locals by forcing foreigners to levy
certain) VAT)

Onus is on PERSON to register within 21 days on VAT 101 form.

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 VALUE of taxable supplies = excludes VAT

CONSIDERATION (in form of money = the money ; not in form of money = open market value at time) =
amount that includes VAT (:. less VAT to get to value of taxable supplies)

REGISTRATION SCENARIOS

 A person that carries on separate businesses – if joint T.S > R1m then MUST REGISTER
 Branches may register separately if each:
o has own independent accounting system/records AND
o can be separately identified iro location or activities
 Group of companies carrying on same enterprise + SARS satisfied that main reason for split is
to avoid registration :. deemed to be the same person for VAT (register when combined T.S >
R1m)

e. IN THE COURSE OR FURTHERANCE OF AN ENTERPRISE

o any enterprise/activity
o carried on continuously/regularly
o not once off txs
o ongoing activity
o in SA or partly in SA
o by any person (co., natural person etc.)
o in course or furtherance of which G or S are supplied
o all supplies that relate to the enterprise (even capital goods)
o for a consideration
o payment in money or otherwise
o a deposit is a consideration
o donation is specifically excluded
o whether or not for profit

Specific INCLUSIONS in ‘enterprise’:

 anything in connection with commencement or termination of enterprise

 activities of a welfare organization (don’t charge VAT but register so they can claim inputs)
 supply of electronic services by person from export country (educational services, games, auction
services, miscellaneous e.g. e-books, music etc., subscription services)
 municipalities deemed to carry on an enterprise where following supplied:
o electricity, water, gas, drainage, sewage and garbage services (these line items have VAT on)
o property rates and taxes – NO VAT

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 Specific EXCLUSIONS to ‘enterprise’:

 activity to extent involves making of exempt supplies (if mixed, can still register)
 hobbies of a natural person (be careful if becomes repetitive + continuous)
 services by employee for remuneration (no VAT levied on salary)
 supplies made outside SA by any branch or main business provided that:
o branch/main business permanently located at premises outside SA
o separately identified
o Independent accounting system
 supply of commercial accommodation where taxable supplies in period of 12 mths will NOT exceed
R60 000 e.g. hotel or guesthouse (can only register when >R60 000 per yr)

Unless used in carrying on enterprise

– then can claim as INPUT!
2. IMPORTATION OF GOODS NOT IN VAT 201 form

Show under “Input” column if used for taxable supplies

VAT is levied on importation of goods (whether a vendor or not). Importer pays SARS.

 Levied because it would disadvantage local suppliers if persons could buy same merchandise overseas
at a lower price because foreigners did not have to increase prices with VAT.
 Goods imported to be used/supplied in course of making taxable supplies, VAT paid on importation =
INPUT VAT (indirectly refunded)
 If not a VAT vendor OR VAT vendor not using imports in course of enterprise – results in a ‘cost’
 Customs becomes agent to collect VAT for SARS in the case of imports

BLNS COUNTRIES OTHER COUNTRIES

(No customs duty; VAT lower) Non-Customs Union Member Countries
Customs Union Member Countries = Botswana,
CUSTOMS DUTY VALUE + 10% OF CUSTOMS
Lesotho, Namibia & Swaziland
DUTY VALUE + CUSTOMS DUTY (import charges)
CUSTOMS DUTY VALUE (value they place on
X 14%
item) X 14%
 ‘Time of importation’ = when goods enter SA
 ‘Time of Supply’ = when goods enter SA
OR are cleared for home use

Country of LAST POINT:. if Germany to Botswana to SA then BLNS 

“IN BOND” SUPPLY

Goods imported & entered for storage at W/H – not yet declared for use in SA
Original purchaser doesn’t take goods (came to collect + not what you wanted :. leave it there; don’t have
money for customs + VAT) – Customs sells!
VALUE = Greatest of
CUSTOMS DUTY VALUE + 10% OF CONSIDERATION for “in bond”
CUSTOMS DUTY VALUE + CUSTOMS supply
DUTY (import charges) X 14%
OR
X 14%
Value calculated in same way for both BLNS and non-BLNS countries – just no import charges for BLNS.
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3. IMPORTATION OF SERVICES Imports by non-vendor OR Non-taxable supplies by vendor

Show under “Input” column if used for taxable supplies

Definition of ‘imported services’:

Supply of services

 by supplier who is non-resident / carries on business outside SA

 to a recipient who is a resident of SA
 to extent services used in SA for purposes of making NON TAXABLE SUPPLIES

:. VAT is not payable if services are imported + fully used for making taxable supplies

o VAT is payable ONLY if service imported by non-vendor OR vendor for purposes other than making T.S
o If importer is a vendor – include in VAT 201 return ; If non-vendor – declares on VAT 215 within 30 days
of earlier of pmt or invoice

VALUE OF SUPPLY = Greatest of

Consideration for supply OR Open Market Value of supply

TIME OF SUPPLY = Earlier of

Issue of invoice OR Payment by recipient

o Prevents unfair competition

o Supply from “head office” outside SA to “branch” in SA = imported services

Imported Services that don’t attract VAT

 Supply of service already subject to VAT @ 14%

 Would be exempt or zero rated services if had been supplied from SA
 Educational services by foreign institutions to SA students
 Rendering services by ‘ee to ‘er
 Supply where invoice < R100

3. Zero-rated Supplies (s11):

Taxable supplies charged with VAT at 0%  enables vendor to claim back all input tax

3.1 Exported Goods (s11(1)(a)(i) & (ii))

“export” – supply of moveable goods under instalment credit agreement/ sale to country outside RSA

Direct export: the supply of

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1. Moveable goods (under a sale/ instalment credit agreement)
2. Goods are consigned & delivered to recipient in an export country
3. Through a designated commercial port within prescribed time period (Interpretation Note No. 30)
4. Supplier obtained & retained all documentary proof (Interpretation Note No. 30)

Supplying vendor exports the movable goods - Official documentation  export/ removal doc.
- Commercial documentation  issued by freight hauler
5. In supplying vendor’s baggage, or (provides proof of transaction & transportation)
6. Supplying vendor’s own transport * 90 days to get doc. from earlier of:
- Time of invoicing or
Zero-rate also applies
- Payment is received
7. Vendor uses cartage contractor to deliver goods (otherwise deemed to be at 14%)
8. Cartage contractor is contractually liable to vendor If doc. obtained at later stage (within 5 yrs from end of
to effect delivery tax period when invoice was issued)  output tax
9. Vendor is invoiced & liable for full cost relating to adjustment may be deducted
such delivery
10. Customer (RSA resident) requests delivery to himself at another address in export country
11. Moveable goods are situated outside SA
12. Moveable goods are subject to process of repair, improvement, manufacture, assembly / alteration
by 3rd party in SA, whereafter goods are delivered to vendor and then to export country
13. Moveable goods supplied to vendor and delivered to vendors customer at address in export country
(indirect supply)

Indirect export: goods delivered in RSA to non-residents (may not be a SA VAT vendor)

- vendor is obliged to charge VAT @ 14% Exports by sea/ air (or cartage contractor by road/ rail)
- qualifying purchaser entitled to refund of VAT Supplier may at own risk decide to apply zero-rate
(not applicable to 2nd hand goods where notional input
1. Vendor’s responsibilities: tax deduction was claimed by vendor)
- charge VAT @ 14%

- Issue tax invoice & advise purchaser of entitlement to VAT refund from VAT Refund Administration

- if 2nd hand goods (notional input prev. claimed)  levy @ 14%, recipient can only claim difference

- be able to furnish info to SARS when called upon to do so

2. Purchaser’s responsibilities:

- ensure moveable goods are exported

- from SA within 90 days (from date of invoice)

- via designated commercial port

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SUMMARY
Goods physically exported by Yes
supplying vendor?

No Direct export & zero-rated

Goods delivered by a supplier’s

cartage contractor?
Yes
No

Indirect export, but may be

Did supplying vendor ensure that Yes zero-rated at supplier’s
goods are delivered to a harbor, an discretion & risk
airport or purchaser’s agent or
supplied by pipeline/ electrical OR
transmission before being exported?
Indirect export & standard
No rated

3.2 Exported Services (s11(2))

a. Transportation:
Insurance of passengers also
- Of passengers or goods is zero-rated if transported from: zero-rated

- place outside SA to another place outside SA

- place in SA to place in export country At least 1 leg outside SA

- place in export country to place in SA

b. Ancillary services to exported goods:

- Additional services supplied when goods are exported (transport & insurance)  zero-rated if supplied to
non-resident that is not a vendor

c. Services rendered outside SA

- Service is zero-rated if physically rendered outside SA (even if rendered to resident)

- 1 April 2015: does not apply in case of supply of electronic services rendered outside SA

d. Services to non-residents

- Service supplied to non-resident (not physically rendered outside SA)  zero-rated if supplied directly to
non-resident not in SA at time services are rendered (e.g.: over the telephone)

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3.3 Sale of a Going Concern (s11(1)(e))
- Parties agree in writing that such enterprise (or part thereof) is disposed of as a going concern & ALL the
following 4 criteria are met:

- Income-earning activity on date of transfer (intention)

- All assets necessary for carrying on enterprise are disposed of (by supplier to recipient)

- At time of contract agree that consideration is inclusive of VAT @ a zero-rate (0%)

- Both parties are registered VAT vendors (supplier must retain copy of recipient’s Notice of
Registration – Form VAT 103 – as proof)

- Calculations relating to going-concern sales:

- 100% taxable usage (≥95): if all (or at least 95%) assets of going concern were used for making
taxable supplies  seller levies OUTPUT tax @ 0% on full transaction

- More than 50% taxable use Don’t need to know for 3rd
- Less than 50% taxable use year level

3.4 Various Other

- Supply of goods & services for agricultural / farming use (seed, feed, fertilizer, etc.)

- Supply of gold coins (Kruger Rands) issued by Reserve Bank

- Certain basic foodstuffs (brown bread, maize meal, samp, mealie rice, rice, pilchards, milk & milk powder,
fresh fruit & vegetables, vegetable oil (excl. olive oil), eggs & lentils). (Dehydrated, dried, canned or bottled
fruit 7 nuts would not qualify for zero-rating)

- Supply of fuel levy goods (petrol & diesel) & certain crude oil products

Use this to remember: 1. A farmer on his tractor 2. is traveling to his girlfriend with padkos

3. During his trip he has to stop to put petrol in 4. He arrives and gives her a gold coin

4. Exempt Supplies (s12):

Not charged with VAT at all

 NO OUTPUT tax levied on exempt supplies

 NO INPUT tax relating to expenditure on exempt supplies may be claimed

Zero-rating of financial services

(performed outside SA/ to a non-
4.1 Financial Services (s12(a) & 2)
resident physically not in SA) takes
precedence over the exemption
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- Financial services that are exempt include:

- Any exchange of currency

- Issue, payment, collection, or transfer of ownership of a cheque / letter of credit

- Issue of debt security

- Issue or transfer of ownership of a share or member’s interest

- Provision of credit & paying interest

- Provision / transfer of ownership of a long-term insurance policy (VAT is levied on short-term)

- Provision / transfer of ownership in superannuation scheme (pension, retirement annuity,

medical aid fund, etc)

- Buying/ selling of derivatives/ options

- DOES NOT INCLUDE: :. there is VAT on these!

- Fee-based financial services

- Underwriting of issue of share/ member’s interest

- Consideration payable for renewal of financial agreements

- Rental agreement payments

- A merchant’s discount (charge made to merchants for accepting credit/ debit card as payment)

- Supply of a cheque book

- Bank charges

4.2 Donated Goods & Services (s12(b))

- Supply of donated goods & services by an association not for gain are exempt (can’t claim input)

- Goods supplied made/ manufactured by association from material of which 80% of the value was
donated are exempt

4.3 Residential Accommodation (s12(c))

- Supply of dwelling under agreement for the letting & hiring thereof is exempt from VAT

“Dwelling”:

- any building, premises, structure, or other place or part thereof

- that is intended for use predominantly as place of residence/ abode of any natural person

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 - including fixtures & fittings belonging thereto & enjoyed therewith

- except where used in supply of commercial accommodation (e.g. hotel)

- exemption still applies where lodging/ board & lodging is supplied by e’er to e’ee where;

- e’ee is entitled to occupy accommodation as benefit of employment or

- e’er operates a hostel / boarding establishment mainly for its e’ees rather than for profit

“Commercial Accommodation”: (excluded from definition of residential accommodation)

- lodging / board & lodging together with domestic goods & services in any house, room, hotel,
etc. that is regularly/ systematically supplied & total annual receipts from supply thereof
exceeds R60 000 in any period of 12 months

- lodging/ board & lodging in a home for the aged, children, physical/ mentally handicapped
persons or
Cleaning & maintenance, electricity, gas, air con,
- lodging/ board & lodging in a hospice heating, telephone, TV, radio, furniture & other
fittings, meals, laundry, nursing services etc.
 subject to VAT @ 14%

 OUTPUT tax levied on full value of supply where accommodation & domestic goods & services are
supplied by a hotel for a period ≤28 days

- Commercial accommodation for unbroken period >28 days  consideration in money is

deemed to be 60% of the all-inclusive charge (VAT is levied only on the 60%, occupant will
still be charged on 100%) → vendor offering accommodation pays 60% of output VAT only

- where separate prices are charged for room & any other services  charge must be
apportioned between room & other services when occupant stays for unbroken period >28
days (VAT will be levied 100% for other services & only +)

4.4 Various Other

- Letting of leasehold land to extent it is used for accommodation in dwelling erected (or to be erected)

- Sale/ letting of land situated outside SA

- Transport of fare-paying passengers (bus, taxi, but not a game-viewing vehicle) & their personal effects
by road or railway (not for purpose of courier service) → zero-rated takes precedence

- Supply of qualifying educational services by State, school, public higher education institution or
institution in SA which is a PBO

- Supply by school, university, technikon, or college solely / mainly for the benefit of its learners of goods/
services for consideration (school fees, tuition fees/ payment for board & lodging)

- Membership contributions to e’ee organisations (e.g. trade union)

- Childcare services by a crèche / after-school care centre

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5. Deemed Supplies → standard rated @ 14%

5.1 Fringe benefits

- provision of certain fringe benefits (7th Schedule) to e’ees by a vendor = deemed supply & subject to VAT
(output tax intended to reverse portion of input tax prev. claimed on those goods)

- NOT APPLICABLE:

- exempt supply (e.g. residential accommodation)

- zero-rated supply (e.g. fuel)

No deemed supply
- supply of entertainment (e.g. meals) :. No output tax
- s8(1) allowances

- Fringe benefits subject to VAT

- assets given free/ at low rate

- services made available for private purposes

- right to use an asset (e.g. company car)

- release of e’ee from debt owed to e’er

- Value of supply:

- other than company car  cash equivalent (excl. VAT) x 14/114

- company car

- motor vehicle  monthly amount: 0.3% x determined value x 14/114

- other vehicle  monthly amount: 0.6% x determined value x 14/114

Step 1: determined value (excl. VAT & finance charges)

Step 2: x 0.3% (input tax was denied) or 0.6% (input tax was claimed)
Step 3: deduct the following
- Input tax was claimed  amounts paid by e’ee to e’er (excl. finance
charges & fuel)
- Input tax was denied  amounts paid by e’ee to e’er (excl. finance
charges, fuel & fixed costs)
- R85 if e’ee bears full cost of repairs and maintenance
Step 4: x 14/114
Step 5: x % taxable use
Step 6: x months

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5.2 Indemnity payments
- if vendor’s stock is stolen  receives cash from insurance (same position as if it was sold), SARS wants
that VAT on disposal

- Vendor pays insurance premiums (short term), entitled to claim input tax, when vendor receives a claim
 obliged to account for output tax on claim received (deemed to be consideration received for supply of
service to extent loss incurred in course of carrying on an enterprise)

- vendor receives indemnity payment under contract of insurance

- vendor is indemnified under contract of insurance by payment of amount of money to another

person e.g. 3rd party insurance

- deemed supply rule NOT applicable:

- payments not related to taxable supplies e.g. stock
- insurer replaces item (not a payment)
- Payment received relates to total reinstatement of goods which were stolen/ damaged beyond
economic repair AND input tax was denied

Output tax is apportioned for fringe benefits and indemnity payments to

extent of taxable supplies

5.3 Ceasing to be a vendor

1) - output tax payable on any goods (except if input tax was denied) and rights owned by a vendor on day
he ceases to be a vendor

2) - output tax also payable on outstanding balances, owing to suppliers, not > 12 months, to extent that
output tax has NOT yet been raised (not in case of death or sequestration) e.g. if it was an asset he
purchased, output would’ve been raised in 1)

- Value of deemed supply (of goods & rights): lessor of

- cost of acquisition, manufacture etc. as well as delivery costs & other deemed costs (incl. VAT) 
if goods & services acquired from connected person then open-market value on date of
acquisition

- open-market value on date of ceasing to be a vendor

- Where vendor deregisters as taxable supplies < R1 million (compulsory registration threshold) or
<R50 000 (voluntary registration threshold)  Output VAT payable must be paid within 6 months

5.4 Supplies to Independent Branches → zero rated

- vendor consigns/ delivers goods or provides services to branch/ main business outside SA (excl. from
definition of enterprise)  vendor deemed to make a supply of goods & services in course of enterprise

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- requirements:

- branch/ main business permanently situated outside SA ABC Ltd. Head office in JHB and a
- can be separately identified & branch in USA which is separately
identifiable and has separate
- has separate accounting system accounting system  supply by JHB to
 supply will be zero-rated USA will be zero-rated

5.5 Payments exceeding consideration

- Vendor receives payment in excess of consideration (price)

- Output tax payable if excess is not refunded within 4 months

- Excess portion is deemed to be a supply of services in furtherance of enterprise

- if excess is refunded later  claim as input tax

OUTPUT TAX: NO APPORTIONMENT

- if only partly used for making taxable supplies, still account for output tax on full consideration, vendor
will then be entitled to additional input tax deduction (s16(3)(h))

- only fringe benefits & indemnity payments are apportioned to extent of taxable supplies

6. Inputs
6.1 Determination of Input tax
- Vendor will be allowed to claim input tax deduction if:

- vendor paid VAT on acquisition or

- notional input tax on acquisition of 2nd hand goods

- Vendor is in possession of valid tax invoice/ required doc. to claim notional input tax

- determine the purpose for which the goods/ services will be used:

- 100 % taxable supplies  claim 100% input tax unless input tax denied

- ≥ 95 % taxable supplies  claim 100 % input tax (de minimis rule)

- < 95 % taxable supplies – apportion input tax (turnover-based apportionment)

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6.2 Denial of Input Tax
1. Entertainment: provision of any food, beverages, accommodation, entertainment, amusement,
recreation/ hospitality of any kind by a vendor whether directly/ indirectly to anyone in connection with an
enterprise carried on by him

- Exceptions: (input tax can be claimed)

- Vendors in business of supplying entertainment:

- charge is made  covers direct & indirect costs / = open MV of such supply or
- entertainment for bona fide promotional purposes to current clients or
- excess foods not consumed given to e’ees / welfare organization

- Supply entertainment to any e’ee/ connected person & charge is made  covers all
direct & indirect costs

- personal subsistence of vendor / e’ees obliged to be away from usual place of residence
for at least one night (if holiday then entertainment :. denied!)

- vendors operating taxable passenger transport services e.g. meal on aeroplan

- vendors organizing seminars/ similar events for reward

2. Club subscriptions: for membership of sporting, social or recreational clubs

- Not denied if payment if for professional membership of e’ee

3. Motor car: includes motor vehicle, station wagon, minibus, double cab light delivery vehicle & any
other motor vehicle of any kind normally used on public roads which has 3/ more wheels constructed/
converted wholly or mainly for the carriage of passengers

- excl. vehicles capable of carrying only 1 person/ vehicles suitable for carrying > 16 persons

- excl. vehicles with unladen mass of 3500kg or more

- excl. caravans, ambulances

- excl. vehicles constructed for special purpose other than carrying passengers

- excl. game viewing vehicles constructed/ converted for carriage of 7/ more passengers (used
exclusively for that purpose)

- excl. hearse

- denial does not apply to: car dealer, vendor who runs a car hire business, vendor who acquired
motor car for purpose of awarding car as a prize or vendor who regularly/ continuously supplies
motor cars as prizes to clients or customers

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6.3 Notional Input Tax on Second-hand Goods

1. Acquire 2nd hand goods

2. From a non-vendor resident of RSA; and
3. Goods situated in RSA
4. To be used wholly/partly for making taxable supplies

:. DEEMED INPUT TAX MAY BE CLAIMED

 2nd hand goods = goods previously owned & used (excl. animals + gold coins + stock from non-vendor)
 Fixed property usually also qualifies if previously owned & used (not if part of land reform regime)

COST
INPUT TAX = 14/114 x lesser of
OPEN MV

 Only claim to extent that pmt has been made for 2nd hand goods (apportion according to amt paid for)
 If sale cancelled, consideration reduced or 2nd hand goods returned – reverse with an output tax

Documentary requirements

Recipient of goods must obtain + maintain declaration by supplier stating that supply is a taxable supply &
sufficient records that incl.:

 Supplier name, ID no., legal registration no. (verify + retain photocopy of ID doc + letterhead)
 Acquisition date
 Description of goods
 Quantity or volume
 Consideration for supply
 Proof + date of pmt

* No doc proof required for cash purchases not exceeding R50.

2nd hand goods exported

 If connected persons – zero rating not applicable if notional input tax has been claimed :. charge output
VAT
 If Direct Export: Output Tax = Notional Input Tax
 If Indirect Export:
o 14% : Refund = VAT levied 14% less Notional Input
o 0% : Output Tax = Notional Input Tax

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7. Special Rules & Miscellaneous
7.1 Irrecoverable Debt
A debtor goes bad
If a vendor accounted for Output Tax iro a debtor (on invoice basis)and:

 It’s a taxable supply

 All/part of debt becomes bad

Then the vendor is entitled to an INPUT TAX DEDUCTION: never actually received the consideration

 VAT levied x (Bad Debt / Total Consideration)

 Doc proof needed: accounting records of outstanding debt + proof that VAT was charged & declared

A debtor recovers
If a debt written off is wholly/partly recovered, since Input Tax was deducted:

The vendor must raise an OUTPUT TAX on portion recovered as far as relates to taxable supply prev. made

 Amt recovered x 14/114

Can’t pay a creditor

Vendor (invoice basis)

 Deducted input tax on taxable supply made to him by creditor

 Cannot pay full consideration
 Within 12 months from tax period in which input deduction claimed
If agreed upon terms/pmt period, period of 12 months determined from end of month in which
consideration payable
 :. Reverse original input by raising an additional output

 14/114 x Unpaid consideration raised as output tax

Subsequently do pay the creditor

 Input tax may again be deducted by the vendor on pmt

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7.2 Time & Value of Supply
Remember!

Value of Supply EXCLUDES VAT vs Consideration of Supply INCLUDES VAT

TIME: when vendor must account for VAT (applies to both output & input tax)

VALUE: value vs. consideration

GENERAL RULE
TIME OF SUPPLY VALUE OF SUPPLY
Earlier of:
 Date of invoice (doc notifying of obligation)  If consideration is money = amt of money OR
 Date that pmt of consideration received by  If consideration not money = open MV
supplier less
VAT included in consideration

CONNECTED PERSONS
 Natural person: any relative, estate of relative, trust fund of relative
 Company: person (their spouse/child) holding >=10% of equity/voting rights/ capital; person connected to
previous; another co. controlled by same s/hs (or connected person to this co.)
 P’ship/CC: members (or person connected to member)

TIME OF SUPPLY VALUE OF SUPPLY

 Goods removed - time of removal; or Open Market Value IF:
 Goods not removed – time made available to  Supply made for no consid. / consid.<open MV
recipient; or AND
 Services – when performed  Recipient not entitled to full input tax
deduction iro supply e.g. non-vendor

RENTAL AGREEMENTS (Operating Leases)

 Any agreement for letting of goods (excl. Finance Leases)

TIME OF SUPPLY VALUE OF SUPPLY

Earlier of:
 Date on which pmt is due General Rule
 Date on which pmt is received
ENTERTAINMENT e.g. Coffee Machine
TIME OF SUPPLY VALUE OF SUPPLY
INPUT DENIED
If you sell – Value = R0

DUAL SUPPLIES
Taxable supply is not only matter to which consideration relates e.g. sell house (private) & printers
(used in enterprise)
TIME OF SUPPLY VALUE OF SUPPLY
Single consideration for >1 supply:
Apportion consideration to each component – only

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 taxable supplies attract VAT

SUPPLY FOR NO CONSIDERATION

e.g. Promotional supplies – product samples
TIME OF SUPPLY VALUE OF SUPPLY
Value of supply deemed to be nil (unless connected
persons) :. OUTPUT = R0 (still claim input but don’t
Usually short charge & pay output)
discussion Q INSTALMENT CREDIT AGREEMENT
Tax: puts all leases together :. doesn’t look at ownership ; Accounting: separates into finance &
operating leases
TIME OF SUPPLY VALUE OF SUPPLY
Earlier of:
 When goods delivered  Consideration in money = cash sale value (PV)
 Time any pmt is received  Cash cost excludes interest/finance charges
 No VAT on interest/finance charges

FIXED PROPERTY TRANSACTIONS (to make taxable supplies)

NEVER tsfr duties
 If seller of fixed prop. is a registered vendor – account for OUTPUT TAX & VAT on a fixed
Note: if VAT is levied, the tx is exempt from transfer duties ito Transfer Duty Act prop. tx!!
 If seller is a non-vendor – TRANSFER DUTIES are levied on the sale
TIME OF SUPPLY (Vendor to Vendor) VALUE OF SUPPLY (Vendor to Vendor)
Earlier of: Either VAT (even if zero –rated) or Transfer Duties
 Date of registration levied on tx – NOT BOTH!
 Date on which any pmt of consideration is o Where amt due is in instalment – only claim
made input to extent that pmt is made (only if buyer
+ seller have agreement :. not paid by 3rd party)

o Buyer will claim either:

 ACTUAL input or
 NOTIONAL input
o If supply not deemed to take place at MV or parties are not connected persons, have to distinguish bet.
fixed prop. supplied in course/furtherance of an enterprise & fixed prop. not supplied in
course/furtherance of an enterprise:

Fixed Prop. Supplied in Course/Furtherance of Enterprise (Purchase from a VENDOR)

 Seller: account for output tax to extent that they have received pmt
 Buyer: may claim input tax as follows

Registered on invoice/pmts basis  Input tax may be claimed to extent that buyer has made pmt of
purchase price

Fixed Prop. NOT Supplied in Course/Furtherance of Enterprise (Purchase from a NON-VENDOR)

 Seller: does not account for VAT (non-vendor)
 Buyer: may claim notional input (on 2nd hand goods) as follows:

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Registered on invoice basis  Can only be claimed ONCE property is registered in name of vendor
(purchaser)
 AND only to extent pmt has been made
Registered on pmts basis  As above BUT only claimed IF full transfer duty has been paid

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